Bulgaria will adopt the euro currency on New Year’s Day, becoming the 21st country to use the European Union’s shared currency and deepening ties with the bloc’s more prosperous states in Western Europe.
The change will affect everyday transactions immediately. In the run-up to the switch, price tags and bank accounts have had to show both currencies, at a fixed rate of 51 euro cents to the outgoing lev. Bank accounts will be converted automatically.
For a limited transition period, people will still be able to pay in levs for about a month, but they will start receiving change in euros. Old notes and coins are expected to disappear from circulation in a matter of weeks.
Bulgaria’s timeline for exchanging old currency is set out as well: until June 30, old money can be exchanged for no fee at banks, post offices and the Bulgarian Central Bank, and the central bank will exchange it indefinitely.
Joining the euro means Bulgaria becomes part of the eurozone, which uses a single internationally used currency and a central bank that sets interest rates across the currency union. That also changes how cross-border spending works for residents traveling and trading within the eurozone, including examples cited involving trips to neighboring EU and eurozone member Greece without having to exchange money and return with unusable leftover bills and coins.
The article also ties the shift to business costs and to influence within eurozone institutions. It says companies that trade with the rest of the eurozone will no longer have to bear currency-exchange costs, savings estimated at 1 billion levs per year, according to the Bulgarian National Bank. It adds that Bulgaria will get a seat on the European Central Bank’s governing council, giving it a voice in interest-rate and monetary-policy decisions.
The euro switch also comes with limits on policy tools. Countries joining the euro give up domestic interest-rate setting because the ECB sets rates in Frankfurt, and they can no longer devalue their currency to gain competitiveness or trade advantage. The article notes Bulgaria had already given up that particular sovereignty aspect because it fixed the lev’s exchange rate to the euro long before the planned adoption.
The euro commitment is described as longstanding: Bulgaria officially committed to joining the euro when it joined the EU in 2007, with Britain and Denmark receiving opt outs and Sweden shelving the issue after voters rejected it in a referendum. The article says the Czech Republic, Hungary, Poland and Romania have not taken the steps needed to join the eurozone.
To adopt the euro, the article says countries must demonstrate a stable exchange rate with the euro and keep inflation, debt and deficits within EU rulebook limits, with EU leaders making the final admission decision after review by the European Commission and the ECB. It places the process in the broader context of the debt-crisis era after 2010, when speculation about Greece leaving the euro and bailouts for Greece, Ireland, Portugal, Spain and Cyprus prompted the EU and ECB to introduce measures intended to prevent a repeat, including shifting banking regulation to the ECB and setting up a rescue fund and bond-market backstops.
Despite those institutional steps, the article says the public mood in Bulgaria is skeptical. It cites Eurobarometer polling from March showing 53% of 1,017 respondents opposed joining the eurozone and 45% were in favor, and a separate Eurobarometer poll taken between Oct. 9 and Nov. 3 reporting that about half opposed while 42% were in favor. The article says the March poll’s margin of error was about plus or minus 3.1 percentage points.
Much of the resistance, the article reports, centers on fears that inflation will rise as merchants round prices up during the changeover, as well as anxiety about losing the currency as a symbol of national sovereignty. It quotes Dimitar Keranov, program coordinator for engaging Central Europe at the German Marshall Fund in Berlin, saying: “They are ‘more about economic anxiety and low institutional trust overall, not ideological concerns against the euro or the European integration of Bulgaria,’” and adds that disinformation on social media attributed to Russian efforts to sow dissension among EU countries also played a role, Keranov said.
Other factors cited include Bulgaria’s ranking for corruption and income levels, with the article saying Bulgaria is second most corrupt in the EU after Hungary, according to Transparency International, and that it ranks near the bottom in income levels with average wages of 1,300 euros ($1,530) per month.
Looking ahead, the article says experience suggests a slight, transient bump in inflation after euro adoption. It reports that ECB President Christine Lagarde said earlier changeovers typically saw an inflation impact of 0.2% to 0.4% percentage point that quickly faded, and she said, “Before adoption, uncertainty is natural.” The article adds that Lagarde argued confidence grows once households and firms use the new currency in daily life and see that a credible central bank is safeguarding price stability.
It also points to research discussed by ECB economists Ferdinand Dreher and Nils Hernborg, saying they wrote that after adoption public opinion shifts in favor of the euro by an average 11 percentage points. The article concludes that some apparent price increases may reflect delays in updating prices, noting that economists say restaurants and hairdressers may hold off revising menus and price lists ahead of the switch, making some increases show up with a lag.